Travails on permanent repeat at RTÉ

Ad competition, licence fee evasion and ascent of Netflix complicate life at Montrose

It's the summer lull before the repeats die down, new shows launch, old ones return and the holiday fill-ins come off air. At RTÉ's campus in Donnybrook, work continues on a new entrance, open area and parking spots. Construction hoardings and debris have become common sights at Montrose, as the campus adjusts to its smaller size and completes what RTÉ calls "sales-enabling projects".

Last year, nine acres of underused land were lopped off and sold to Cairn Homes, yielding something of a throwback to the good old days: a large cash surplus.

RTÉ entered 2018 with a problem that competitors might regard as nice to have: how to invest the net gain of €78.5 million from the land sale. In its canteen, once-regular faces who left under its voluntary exit scheme are absent, while new management hires, brought in after a restructuring by director-general Dee Forbes, are tasked with learning to master the organisation’s notorious bureaucracies.

Internally, there is support, even enthusiasm, for the former Discovery executive’s vision, which is designed to break down old-fashioned barriers between television and radio and digital divisions, abolish inefficient “silos” and make RTÉ a nimbler, leaner operation with fewer employees. In 2017, this project came with a restructuring charge of €29.5 million.


But though there is much understanding within Montrose for what Forbes is trying to do on paper, most people accept, too, that her success as director-general is predicated on something that is beyond her control: government policy on its public funding.

This week, Minister for Communications Denis Naughten told the Cabinet that he was forming a working group of senior officials to consider the future funding of public service broadcasting, which he has previously described as being in "deep trouble".

There was talk of large hotels and State properties having to pay more for their television licences – more than the household rate of €160, perhaps, or maybe time will finally be called on the anomaly whereby the owner of two guest houses pays twice as much as the owner of a 100-bedroom hotel.

‘Meaningful action’

RTÉ duly welcomed reports that the issue of television licence reform was discussed at Cabinet. “RTÉ has said on the record many times over the past number of years that meaningful government action on reforming the licence fee system is essential,” its statement went.

Like an episode of Father Ted on the RTÉ2 schedule, we have indeed been here before many times. The idea that hotels should pay more than households goes back to at least 2003. Naughten's establishment of a working group, meanwhile, follows the publication last November of a recommendation-laden report by the Oireachtas communications committee, which, in turn, followed months of hearings with media sector representatives, which, in turn, followed a Dublin Castle forum on public service broadcasting last July.

"I do worry when we see words like working group and steering group," says Elaine Geraghty, chief executive of Screen Producers Ireland, which represents the Irish independent production companies that make a substantial chunk of the programmes on RTÉ's television schedule, outside news and current affairs. "The recommendations are there."

Every time RTÉ lobbies for public funding reform, it attracts “predictable” below-the-line attacks, she notes. “Our place in the whole equation is often not recognised. But it is incredibly important for us that public service broadcasting is well-funded and it is broken right now.”

While RTÉ has some nice problems – how to make €78.5 million go as far as it possibly can, plus what its rivals call the “head start” of its €186 million in television licence fee receipts – there are also some nasty ones.

RTÉ recorded a deficit in six of the eight years before 2017. Take away the exceptional item that is the land sale cash and it again had an operating deficit in 2017, albeit a lower one at €6.4 million than the near-€20 million figure for the previous year.

Spend less, its critics say. And it has. Between 2008 and 2016, RTÉ reduced its operating costs by €96 million, or some 22 per cent. Independent producers were a major casualty of this, with RTÉ’s spending on commissions halving from to last year’s figure of €39.6 million (just above the amount it was statutorily required to spend).

RTÉ appears stuck in an unpleasant financial predicament in which its total annual funding repeatedly falls short of the price it places on its obligations as a public service broadcaster.

Evasion rate

In and out of the spotlight goes the question of the State's 14.5 per cent evasion rate for the television licence fee. To appreciate the significance of the Government's attitude to the licence fee, which is collected by An Post, you first have to look at the other, now lower and even more vulnerable side of RTÉ's dual funding.

RTÉ’s commercial income peaked at €245.5 million in 2007 the year before the economy crashed. A decade on, it amounted to €151.5 million. Last year saw a dismal 6 per cent decline in television revenue, which led to an overall 4 per cent drop in commercial income.

Isn't everyone watching online these days? Well, not exactly. In any case, RTÉ's income from digital advertising (meaning RTÉ Player ads and online display ads) plunged 12 per cent, as Google and Facebook extended their control of that market.

Recovery from the sharp and protracted recession has been complicated because in that time the market did not merely shrink, it spread. First, there was the impact of the “opt-outs”, or the lengthening tail of UK-based channels estimated to earn, unfettered, as much as €250 million from localised advertising in the Irish market. Then both radio and television started to lose chunks of business to the online giants.

Brexit was to blame for much of last year’s decline, but the big fear, the one that gets a mention in all of RTÉ’s pleading for more cash, is that there’s an existential crisis lurking.

In this scenario, all Irish broadcasters, not just RTÉ, would find themselves struggling to compete with Big Tech for the attention of both advertisers and audiences. As far as its audio-visual culture is concerned, Ireland would wind up little more than a region of the UK or "the 51st state of the US", as ShinAwil chief executive Larry Bass forcefully put it.

Forbes told the Public Accounts Committee (PAC) in May that the competitive threats were "unprecedented". RTÉ's boss since the summer of 2016 warned that without licence fee reform there would be "a devastating impact" on RTÉ's schedules, its capacity to fulfil its remit and its relevance to Irish audiences.

Cost surprises

That day, PAC members were more interested in RTÉ’s record on bogus self-employment (not at all good), the value-for-money in presenter salaries (a regular own goal) and establishing if Montrose plans to introduce an RTÉ2 +1 channel and if not, why not (one is coming).

There was also a revealing period of surprise about the cost of making programmes versus the cost of merely acquiring them from overseas – for a drama series, the difference could be €1 million per hour versus €5,000 per hour.

“There’s surprise about quite a few things, to be honest with you,” says the SPI’s Geraghty. She lists some of the well-known programmes the independent sector makes for RTÉ. “We have got to work harder at communicating what we do,” she says. “If you take independent production out, there’s a pretty poor schedule.”

“In an ideal world”, RTÉ would have much less dependence on fluctuating, unreliable commercial revenues and would instead become a publicly funded “publisher-broadcaster” that commissions virtually all of its programmes from the independent sector, SPI argues.

This is where it parts company with Montrose. “We obviously have a close working relationship and it’s in good shape,” says Geraghty. “But we don’t agree on everything.”

Commercial rivals would certainly like it if RTÉ was to become, well, less commercial. For Virgin Media Ireland and its broadcasting subsidiary TV3 Group (to be renamed Virgin Media Television from the end of August), the problem is that RTÉ does too much.

Almost all of the most-watched shows on Irish television this year will be on RTÉ – only TV3's move to outbid RTÉ for Six Nations rugby rights will stop 2018 from being a repeat of its clean sweep in 2016 and 2017.

Virgin, owned by Liberty Global, an international cable giant controlled by billionaire American John Malone, makes the case that not even the BBC, which stays out of advertising in its domestic market, has that level of dominance.

If RTÉ “cut its cloth”, it wouldn’t rack up “unsustainable” deficits and there would be more room for Virgin to do business, it argues.

But could an RTÉ that is smaller but has more stable public funding really function in a market as deprived of scale as this one without jettisoning the public service commitments that justify its existence in the first place?

Longwave backlash

As much as the very concept of the licence fee can attract opprobrium, there are also vociferous backlashes every time RTÉ makes a retreat from pretty much anything it does. It was unable, for example, to press ahead with plans to save as much as €250,000 a year by closing its longwave Radio 1 service, with the move deferred until 2019 after protests from the Irish community in Britain and political frowning here.

It looks like it will get its wish to shed responsibility for the National Symphony Orchestra but there has been much pain to get to this point, not least for the orchestra.

There is public dismay, too, whenever RTÉ loses sports rights to either pay-TV companies or to the ad-heavier TV3/Virgin and colourful social media ire when the rare home-produced Sunday night dramas don't hit the mark. There are also those who will agree with RTÉ's director of content, Jim Jennings, who admitted to the PAC that he didn't believe RTÉ was fulfilling its remit on Irish language programming.

For Animation Ireland, which represents 26 Irish animation companies employing 1,200 people, RTÉ’s closure of its young people’s programming department, announced in late 2016, was simply not the action of a public service broadcaster that cares deeply about catering for the under-16 audience.

Nor is its €700,000 per annum funding of animation a "satisfactory" commitment, says chairman John Phelan.

Irish animation companies are successful internationally, but it is tough to do those deals without the commissioning back-up of their home public service broadcaster. “What we really want to see is some nurturing. At the moment, it isn’t sufficient,” says Phelan.

Animation Ireland is “trying to be more vocal” about educating the political class about its industry, which offers skilled full-time jobs and brings in foreign direct investment. Members were “upset” by the Government’s recent audio-visual plan when it contained “nothing specific” for the sector.

Phelan is mindful of the constraints facing RTÉ. “On the one hand, we are happy to beat them up, on the other we are cognisant that they are restricted. Our understanding is that they are getting cut left, right and centre.”

For RTÉ, the “key challenge” of slashing operating costs has necessarily included a voluntary exit scheme. Some 84 people had left under it by the end of last year, at which point RTÉ had 1,924 staff (with 317 of these part-time or casual). While there was a second tranche of exits in the spring, it is understood not to have reached its original headcount reduction target of 200-300 people.

Capital investment

And there is still debt on the books. The largest of these, an outstanding €40 million project loan from Barclays to pay for Digital Terrestrial Television (DTT) infrastructure, neatly illustrates the risk of policy inaction in the fast-evolving broadcast media. Had this project been pushed during more plentiful times when other European countries were doing it, rather than in the recession-struck years before the EU's 2012 deadline for analogue switch-off, then maybe this debt wouldn't still be on its books.

Much-delayed capital investment did get under way last year, with a technology investment of €6.6 million, including new graphics systems, digital analytics and an upgrade of the RTÉ Player expected to be unveiled soon.

Consumption habits worldwide increasingly lean towards on-demand. In the UK, the BBC's own research shows young people (aged 16-24) were now spending more time watching Netflix than all BBC television, including its iPlayer.

In the Irish market, statistics as stark as this one don’t exist. The industry is often at pains to point out that the amount of time people spend daily watching television on a TV set – an average of two hours and 55 minutes a day, according to TAM Ireland – has been stunningly resilient, falling just six minutes since 2007.

Still, RTÉ programmes , those aimed at younger audiences in particular, tend to draw lower absolute viewing totals than they did a decade ago. And if Netflix, with its fast-growing annual spend on original content of $8 billion (€6.8 billion), is making life difficult for the BBC, then it’s hard not to imagine the difficulties it poses for RTÉ. That it can do so without taking advertising is all the more incredible.

Netflix, now in two out of every five Irish homes, had barely launched here back in 2012 when then Labour minister Pat Rabbitte proposed the introduction of a household broadcasting charge, not dependent on ownership of any particular device.

Fine Gael firmly swept it off the political agenda after the water charges debacle and every revival of the idea since then has been tentative at best. But for many in the industry, it remains both the elusive happy ending and the logical option for any government that cares about Irish culture as much as this one says it does.

What are the funding options for RTÉ

Introduce household media charge

The plan examined by two former Labour communications ministers, Pat Rabbitte then Alex White, still makes sense to a lot of people including the Oireachtas communications committee, which made it the first recommendation of its report last November. The current television licence funding model is “not fit for purpose”, said chairwoman Hildegarde Naughton, and should be replaced by a household-based broadcasting charge collected by the Revenue Commissioners.

Change the definition of television

Minister for Communications Denis Naughten spent some time in 2016 and 2017 exploring the idea of expanding the definition of the devices eligible to pay (a statutory instrument from 2009 specifically exempts various devices). In the UK, people who only access the BBC through its iPlayer are eligible to pay the licence fee since 2016. RTÉ says that since 2009, the number of “no TV” homes has grown by more than 200 per cent, resulting in “lost” funding of €24 million.

‘Collect what’s due’ from licence fee

RTÉ says some €36 million could be recovered through improvements to the licence fee collection system. An Post, the collection agent, commissioned a counter-report from Accenture that suggested the rate of evasion may be lower than the Department says and that a crackdown would yield just €11 million for RTÉ. The Minister has explored the idea of putting the business out to public tender. “At the very least, they should collect what’s due,” says Screen Producers’ Ireland chief Elaine Geraghty.

Change the rate from €160

The television licence fee has been the same rate since January 2008, when it increased by €2 from €158.The Oireachtas committee advised that the level of the fee should be reviewed every two years “in light of the Consumer Price Index”. But the Minister told the Dáil his priority was to reform the current collection model and reduce the evasion rate, rather than “imposing additional charges on the public”. There have been no hints of a cut in the rate either.

Spread public media funding

RTÉ receives 86 per cent of licence fee receipts with 7 per cent put into the Broadcasting Authority of Ireland’s funding schemes (which can be accessed by independent television and radio producers) and the balance going to TG4 and to pay for collection costs. Other parts of the media – most vocally the Independent Broadcasters of Ireland group that represents the non-RTÉ radio sector – argue for a share of the funds to help pay for their public service content.

Increase funds in respect of free licences

The Department of Employment Affairs and Social Protection pays the Department of Communications a fixed amount for the free television licences given to about 430,000 households – mostly older people – as part of the Household Benefits Package. But this sum is subject to a cap and was cut during the recession. In every budget, the Government can effectively increase or decrease RTÉ’s funding by changing the cap on one department’s payment to another.

Switch to general taxation

Funding public service media through general taxation has the advantage of being fairer than a set fee that is the same for everyone eligible, regardless of their income. The argument against is that it harms the independence or perceived independence of the public service broadcaster. The centre-right Danish government recently announced it was scrapping its fee and replacing it with direct funding that will result in a 20 per cent budget cut for broadcaster DR.

Legislate to allow retransmission fees

RTÉ has asked the Government to amend the “must offer” part of broadcasting legislation that prohibits it from charging pay-TV operators for their main channels. The Oireachtas communications committee backed it on this in principle, as did the Broadcasting Authority of Ireland. The move is fiercely opposed by Sky, which threatened to drop RTÉ from its service, and Virgin Media Ireland, which said it would pass the cost on to its subscribers.